Gulf drilling ban will likely cost local jobs

Published: Tuesday, June 1, 2010 at 11:46 a.m.

Last Modified: Tuesday, June 1, 2010 at 11:46 a.m.

HOUMA — Experts are working to get a handle on the potential economic impact of President Barack Obama’s order last week to halt exploratory deepwater drilling for six months.

Estimates differ, but lost jobs are a certainty for Gulf Coast states, particularly Louisiana.

“The immediate impact is a lot of people are going to be put out of work,” said Loren Scott, an economist and professor emeritus at LSU who studies the state and local economies.

Thirty-three rigs are now exploring in deepwater areas of the Gulf. It’s typical for 200 to 280 people to work on each of those rigs, Scott said. Simple math puts the number of people who could be directly affected between 6,600 and 9,240.

And Scott estimates that for every job directly involved oil-and-gas drilling and production, at least three people are employed in related fields such as manufacturing or transportation. That would mean 19,800 to as many as 27,770 jobs could be impacted across the region.

Over the past six weeks, anywhere from 19 million to 42 million gallons of oil from the well drilled by the BP-leased Deepwater Horizon rig have leaked into the Gulf, making the spill the worst in the nation’s history, government officials say. On Saturday, BP said its “top-kill” procedure, the latest of several attempts to seal the leak, had failed.

At a Thursday news conference, Obama called for an exhaustive investigation into what caused the disaster to ensure it doesn’t happen again. His new steps to restrict drilling include a ban on new drilling permits for six months, a suspension of planned exploratory drilling off the coasts of Alaska and Virginia and a halt to work by 33 the exploratory deepwater rigs now in the Gulf.

Industry sources say it’s important to get to the root of the explosion that killed 11 workers on the Deepwater Horizon and triggered the leak that BP has been unable to stop. But they also say Obama’s policy is overkill that could further devastate an economy that will already see its tourism and fishing industries crawl to a standstill because of the still-spreading oil.

Port Fourchon, which serves more than 90 percent of the deepwater activity in the Gulf of Mexico, could see as much as 25 percent of its business disappear, director Chett Chiasson said this past weekend. Roughly a third of the jobs in the Houma-Thibodaux area are either directly in the oil-and-gas industry or closely associated with it, and many others depend on the industry’s health.

Ken Wells, executive director of the Offshore Marine Service Association, a trade group for the workboats that serve offshore rigs, said the impact is much broader than just the employees of those 33 rigs.

Each rig supports about two offshore-service vessels, meaning those crews will find their futures uncertain, he said. The same will go for the local shops that would have made the machine components for those wells. Also affected are the fabrication yards that would have made the production platforms once the drilling was complete.

“We really have to be fearful of a dramatic impact on the Louisiana economy at this point,” Wells said. “The whole offshore industry is predicated on being able to continue drilling projects and keep projects in the pipeline.”

A blanket ban, he added, “feels a little less like protection and a lot more like punishment,” particularly when the industry just emerged from a downturn from falling energy prices and a depressed world economy.

The six-month ban also could be extended, Wells said. The broader concern would be that companies would relocate elsewhere — potentially overseas — and not return to the Gulf of Mexico for years.

“There would have been a way to protect against this accident happening again,” Wells said, “without simply pulling the plug on the whole industry.”

Stephen Moret, the state’s economic-development secretary, did not respond to a request for comment Monday. But he told the New Orleans Times-Picayune that the region could lose as many as 6,000 jobs over the short-term. A long-term suspension could result in the loss of 10,000 jobs. The cost could be as many as 20,000 jobs over the next 12 to 18 months between direct losses and missed job-creation opportunities if energy prices rise.

GNO Inc., the 10-parish group that promotes business in the New Orleans metro area, said Friday it would conduct an economic-impact study to assess the fallout.

Dale Benoit, chairman of the GNO Inc. Public Policy Committee, said the study will be conducted by Innovative Emergency Management. GNO Inc. will work with groups like the Thibodaux-based South Louisiana Economic Council to extend the study beyond the GNO’s traditional coverage area.

Staff Writer Kathrine Schmidt can be reached at 857-2204 or Kathrine.schmidt@houmatoday.com.

<p>HOUMA — Experts are working to get a handle on the potential economic impact of President Barack Obama's order last week to halt exploratory deepwater drilling for six months.</p><p>Estimates differ, but lost jobs are a certainty for Gulf Coast states, particularly Louisiana.</p><p>“The immediate impact is a lot of people are going to be put out of work,” said Loren Scott, an economist and professor emeritus at LSU who studies the state and local economies. </p><p>Thirty-three rigs are now exploring in deepwater areas of the Gulf. It's typical for 200 to 280 people to work on each of those rigs, Scott said. Simple math puts the number of people who could be directly affected between 6,600 and 9,240.</p><p>And Scott estimates that for every job directly involved oil-and-gas drilling and production, at least three people are employed in related fields such as manufacturing or transportation. That would mean 19,800 to as many as 27,770 jobs could be impacted across the region.</p><p>Over the past six weeks, anywhere from 19 million to 42 million gallons of oil from the well drilled by the BP-leased Deepwater Horizon rig have leaked into the Gulf, making the spill the worst in the nation's history, government officials say. On Saturday, BP said its “top-kill” procedure, the latest of several attempts to seal the leak, had failed.</p><p>At a Thursday news conference, Obama called for an exhaustive investigation into what caused the disaster to ensure it doesn't happen again. His new steps to restrict drilling include a ban on new drilling permits for six months, a suspension of planned exploratory drilling off the coasts of Alaska and Virginia and a halt to work by 33 the exploratory deepwater rigs now in the Gulf.</p><p>Industry sources say it's important to get to the root of the explosion that killed 11 workers on the Deepwater Horizon and triggered the leak that BP has been unable to stop. But they also say Obama's policy is overkill that could further devastate an economy that will already see its tourism and fishing industries crawl to a standstill because of the still-spreading oil.</p><p>Port Fourchon, which serves more than 90 percent of the deepwater activity in the Gulf of Mexico, could see as much as 25 percent of its business disappear, director Chett Chiasson said this past weekend. Roughly a third of the jobs in the Houma-Thibodaux area are either directly in the oil-and-gas industry or closely associated with it, and many others depend on the industry's health.</p><p>Ken Wells, executive director of the Offshore Marine Service Association, a trade group for the workboats that serve offshore rigs, said the impact is much broader than just the employees of those 33 rigs.</p><p>Each rig supports about two offshore-service vessels, meaning those crews will find their futures uncertain, he said. The same will go for the local shops that would have made the machine components for those wells. Also affected are the fabrication yards that would have made the production platforms once the drilling was complete.</p><p>“We really have to be fearful of a dramatic impact on the Louisiana economy at this point,” Wells said. “The whole offshore industry is predicated on being able to continue drilling projects and keep projects in the pipeline.”</p><p>A blanket ban, he added, “feels a little less like protection and a lot more like punishment,” particularly when the industry just emerged from a downturn from falling energy prices and a depressed world economy.</p><p>The six-month ban also could be extended, Wells said. The broader concern would be that companies would relocate elsewhere — potentially overseas — and not return to the Gulf of Mexico for years.</p><p>“There would have been a way to protect against this accident happening again,” Wells said, “without simply pulling the plug on the whole industry.”</p><p>Stephen Moret, the state's economic-development secretary, did not respond to a request for comment Monday. But he told the New Orleans Times-Picayune that the region could lose as many as 6,000 jobs over the short-term. A long-term suspension could result in the loss of 10,000 jobs. The cost could be as many as 20,000 jobs over the next 12 to 18 months between direct losses and missed job-creation opportunities if energy prices rise.</p><p>GNO Inc., the 10-parish group that promotes business in the New Orleans metro area, said Friday it would conduct an economic-impact study to assess the fallout.</p><p>Dale Benoit, chairman of the GNO Inc. Public Policy Committee, said the study will be conducted by Innovative Emergency Management. GNO Inc. will work with groups like the Thibodaux-based South Louisiana Economic Council to extend the study beyond the GNO's traditional coverage area.</p><p>Staff Writer Kathrine Schmidt can be reached at 857-2204 or Kathrine.schmidt@houmatoday.com.</p>